A Strange Feeling Pt 2

Lets not ignore the tremendous volume spike then. What has happened in the last 10 years when there was a tremendous spike to the downside?

Lets take a quick look. June 2006, Feb 2007, Dec 2004, Sept 2001, July 2002.

When you have a high volume selloff, that means everyone is selling. Whoever is left is not selling. Simple enough.

If everyone sells, then there can only be buyers of the market left.

Look at this classic double bottom chart. When you have a selloff on high volume then comes the bounce. Sometimes the bounce is a deadcat, other times it turns into something meaningful.

I see today as a buying opportunity.
 

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That's a GREAT point Michael I'm going to stew on it for a while. But Those selling pressures you speak of were accompanied by a VIX reading %-wise MUCH greater than we have now....
 
Quote from michaelscott:

Lets not ignore the tremendous volume spike then. What has happened in the last 10 years when there was a tremendous spike to the downside?

Lets take a quick look. June 2006, Feb 2007, Dec 2004, Sept 2001, July 2002.

When you have a high volume selloff, that means everyone is selling. Whoever is left is not selling. Simple enough.

If everyone sells, then there can only be buyers of the market left.

Look at this classic double bottom chart. When you have a selloff on high volume then comes the bounce. Sometimes the bounce is a deadcat, other times it turns into something meaningful.

I see today as a buying opportunity.
More...

There is no double bottom yet. I think the market will whipsaw a bit for a while, and it will retest the lows. That would be a double bottom if that low holds.
 
The VIX is not what most people believe it to be. The VIX is simply a statement of what the options market believes the S&P500 will fluctuate in the next 30 days. You take the VIX# then divide it by the square root of 12 and you have the percentage fluctuation that the options market believes the S&P 500 will do in the next 30 days. The flux could either be to the downside or the upside.

In any event, these are implied fluctations that the options market believes to take place meaning its only an educated guess.

Quote from stonedinvestor:

That's a GREAT point Michael I'm going to stew on it for a while. But Those selling pressures you speak of were accompanied by a VIX reading %-wise MUCH greater than we have now....
More...
 
What happens when every single member of the S&P reaches an oversold RS reading at the same time?

Boing. It's as simple as that.

But Beazer about to go bankrupt for giving homes away to bad credit a hedge fund a week now going under has replaced the news of takeovers... this bump in housing is what I'm resting my hat on today but it's a slim hook.

Anyway off to see Rattattui to cheer up my kid (earache) That's the excuse anyway personally I can't bare to watch the fade in the last hour again. Bring em home strong boys! Take to the whip!
 
I think they sold em' a wee bit too early today folks!
Typical bear mistake.

>>The VIX (CBOE Volatility Index) is +2.38 (+10.1%) at 25.89, the VXN (Nasdaq Volatility Index) is +2.13 (+9.0%) to 25.80. The last time the VIX was at these levels, the S&P 500 was trading at ~868 (4/11/03), about 40% below current levels in the S&P 500.

>>15:49:08 Comment The CBOE put/call ratio is currently at 1.32, indicating more put than call trading.

>> So far not a hedge fund mentioned has drawn my attention. No one I know would invest in these instruments and THE REAL QUESTION IS THESE SUPPOSED BANKS- Like Mcguire using 7 x leverage. Where's the regulation? Well there is none- it's hedge funds. But these are banks! normal folks can get injured. Ah the circle is finally drawn. The EXPLOSION of hedge funds, how many have been employing these stupid strategies in the debt market. Wasn't the yen carry trade enough for these gluttons?

The deals are going to get done. There's so much cash at these companies they can buy each other we don't need private equity to support this market not earnings wise and certainly not share count wise. As long as companies continue to retire shares faster than new shares come to market this great Ponzi scheme can continue.

But when a really accessible fund something included in a fund of funds, bought by normal folks >> when they are frozen out of their accounts. It's Chinatown Bank Time... recession.

Until then pop the bubbly folks 3rd HIGHEST volume of the year and a STRAIGHT line up at the close: up 158 a EXPLOSION. Everything lost since last thursday gained back in 15 minutes of trading... except if you own any real world mid cap or small cap in which case "poof" you are down 20% on everything and they're not coming back.

Massive up and down volatility are the wobbles before something more serious I'm afraid...
This is all quite nerve racking.
 
Here's how it played out on the floor. First there was a wave of rumors of housing bankruptcies then there was a BIG rumor of a massive sell program to go off in the last hour. The effort of that rumor apparently was to move the bears up a bit ... so was it true or counter strategy? Ha Counter strategy the bears bit and pressured the rally too soon there was no sell program- the buys came in and at the close they covered and then all HELL broke loose. You can't make this stuff up. Etrade and Schwab each down 3% interesting... some people being scared out of the market no doubt.

HIGHLIGHTS*
>NDX 35 points off the low in just 30 min
SPX now 28 higher SPX popped 23 points in 1/2 hour,NDX 31

>> 8 different swings during the session!!
 
What a Wacky Wed It Was...

Wow. First off how about them morning futures? The futures traded down almost 20 points overnight before coming back allowing the market to open flat to slightly positive on the day. Talk about the comeback kid! I suppose in a perfect world the S&P would have gapped 10 points lower on the open and that would have signaled the bottom. Unfortunately life is not so simple. That's why I think there is more probing to be done to the down.

1460-1465 was the critical resistance area to get through and the SPX closed at 1466, the Fibonacci 62% retracement level and just below the key week long down trend line. Closing above 1470 and more importantly, the 76% level at 1477, will indicate a likely rally back to the 1490-1500 level.

>However, 1490-1500 remain a significant band of resistance and it will take a notable change in character to solidly overcome this resistance level.

Total volume was huge at 3.8 Billion shares. Despite negative breadth, directional volume was weighted to the upside. Overall the market remains near maximum oversold levels. Over the past few years, when an excessive oversold condition was reached, after a three to five day counter-trend move, a second major round of SELLING took place. For now, that is our biggest worry- . Will this choppy move higher last only three to five days as has been the norm in similar oversold bounces... or could we see spurts higher for as long as three weeks?

I'm betting on the longer time frame. but in light of the current market conditions, you focus on the three to five day time frame for now. One scenario that could play out is that the S&P will retrace a third to half of its recent losses, then plummet back down to new lows. This is what happened when then the S&P last tested its 200-day MA in May of 2006. This would cause me to start bleeding internally. The other possibility is that a legitimate, sustainable bottom is being formed at the 200-day MA, though the major indices have a lot of supply to absorb if this is to be the case.

It still feel to me that the easier money is on the short side now & until the market proves otherwise, the short side of the market carries a much better chance of profitability. That doesn't mean we can't buy the short-term bounces along the way. Just:

> reduce your position size in order to decrease your risk.
> Buy higher quality stocks with RS
> sell into strength to lock in profits, rather than trailing a stop to maximize your gains.
>If you are stopped out you are out. (I'm a fraud in this regard folks I never use stops and it kills me every time.) Do It! Reversals are everywhere but so are oversold bounces.
>Try not to forget that even though we appear to be going up, the primary trend is DOWN right now.

~ stoney
 
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